Gold Wavers Ahead of Big Data Week, Fed and Jobs Report Eyed for Market Cues

GOLD PRICES FORECAST:

• Gold prices were subdued on Friday, but losses were limited
• Traders appear to be avoiding large directional bets ahead of important economic events in the coming days
• The Fed May meeting’s monetary policy decision and the U.S. labor market report will steal the limelight next week

Most Read: US Core and Headline PCE Diverge, Employment Costs Rise, US Dollar Nudges Higher

Gold prices (XAU/USD) retreated on Friday, weighed down by a stronger U.S. dollar, but the pullback was modest as falling U.S. Treasury yields capped the downside. In late morning, bullion was down 0.05% to $1,999, with many traders sitting on the sidelines and avoiding taking large directional bets ahead of major U.S. economic events in the coming days that could guide markets in the near term.

There are a number of highlights on the calendar for the week ahead, but perhaps the most important ones are the FOMC monetary policy decision on Wednesday afternoon and the U.S. nonfarm payrolls report on Friday.

US ECONOMIC CALENDAR

Source: DailyFX

Focusing on the Fed, policymakers are expected to raise borrowing costs by 25 basis points to 5.00%-5.25%, but this could be the last hike of the cycle in the face of intensifying economic headwinds, including the risk of recession later this year. To gain insight into the policy outlook and better prepare for the future, traders should look closely at forward guidance and, more importantly, Powell’s press conference.

In any case, if the central bank officially confirms that the tightening campaign is over, yields are likely to start falling rapidly across the curve as markets try to front-run the pivot to an easing stance. In theory, this should favor rate-sensitive precious metals, boosting gold prices heading into the summer.

On Friday, nonfarm payrolls (NFP) results will undoubtedly steal the limelight. The March data, which showed that employers added 236,000 workers, probably overstated strength by not reflecting the full impact of the U.S. banking sector crisis, but the April report should better capture those developments.

For the reason mentioned before, it would not be surprising if hiring slowed significantly and the economy created fewer jobs than the 178,000 projected. A negative surprise may reinforce the view that the country is headed for a downturn, creating a favorable backdrop for safe-haven assets. This scenario should be supportive of gold prices.

Turning to technical analysis, gold appears to have entered a consolidation phase after breaking below a short-term ascending channel, with prices currently hovering above support at $1,975. If this floor holds, XAU/USD could rebound and challenge resistance at $2,000 soon. If this barrier is taken out, the metal will have fewer obstacles to retesting its 2023 highs.

On the flip side, if selling pressure accelerates and prices breach support at $1,975, we could see a drop toward the 50-day simple moving average in short order. On further weakness, attention shifts to $1,905, the lower bound of a medium-term rising channel.

GOLD PRICES TECHNICAL CHART

Gold Futures Technical Chart Prepared Using Trading View